According to the Bank of Ghana, the businesses constituted 80.6 percent of loan default attributable to the private sector for last year compared to the estimated 7.9 percent of loan default attributable to the private sector recorded by foreign businesses.

This is among the key findings of the Banking sector report for January this year.

The report catalogued operations in the banking industry as at December 2017.

Between December 2016 and the same period last year, the total loans that banks offered to their customers increased from 35.4 to 37.66 billion cedis.

The Bank of Ghana’s report also put the banking sector’s non-performing loans (NPLs) at 8.58 billion cedis as at the end of last year compared to the 6.14 billion cedis recorded in the preceding year.

Even though loan disbursements to both indigenous and foreign private sector businesses went up for the period, the local private businesses defaulted most in terms of repaying the loans.

Of the ninety-four percent loan default attributable to the private sector, indigenous private enterprises accounted for as much as 80.6 percent of total NPLs in December 2017 compared with a share of 78.9 percent in 2016.

Their foreign counterparts on the other hand, managed to bring their percentage of loan default down to 7.9 percent from 13.2 percent in the preceding year.

Meanwhile the public sector’s contribution to the industry’s NPLs increased from 3.2 percent in December 2016 to 5.7 percent in December 2017.

It is however not certain, what factors accounted for the inability of local businesses to repay for loans contracted from banks.

–

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post Local businesses worst loan defaulters in 2017 – BoG report appeared first on Citi 97.3 FM - Relevant Radio. Always.

The central bank on Monday, March 26, 2018 announced that it has reduced the policy rate by 200 basis points after concluding its Monetary Policy Committee (MPC) meetings for the quarter.

The Governor of the Bank of Ghana, Dr. Ernest Addison among others mentioned that the decision was arrived at following indications that other variables point to the central bank’s ability to meet the annual inflation target.

But some industry players that Citi Business News has been speaking to have expressed diverse thoughts on the impact of the reduction.

For the Head of the Economics Department of the University of Ghana, Prof. Peter Quartey, the reduction has been anticipated.

He believes it should propel growth of private sector businesses.

“We can also see that the exchange rate has been stable and then inflation has inched up slightly with expectations not likely to increase. So based on all of these and then also in line with government policy of providing cheaper access to credit to grow the private sector, I think a decline in the policy rate is more than welcome. It is however my hope that the banks or the money market will responds positively by also reducing their lending rates.”

Another Economist with GN Research, Emmanuel Zewu however described the 200 basis point as being a little on the high side.

Though he admits to the need for a reduction, he stressed that the cedi’s relative depreciation against some international currencies.

“If you look at it, even though the cedi has been stable especially when it comes to the dollar rate , the other major currencies especially the Pound and the Euro are not performing too well; then you combine that with increasing petroleum prices on the international market essentially, there will be inflationary powers going forward. So I was thinking the monetary policy committee will be more conscious or cautiously reduce the monetary policy rate but the 200 basis points reduction is more or less on the high side for me,” he explained.

Meanwhile the CEO of the Private Enterprise Federation, Nana Osei Bonsu says the business will be comfortable only when commercial banks let it reflect in their interest rates.

“What we will want to see is that this policy rate has a direct correlation, a direct impact so when it is reduced by 200 basis points we want that to reflect in the interest rates that will be charged by the universal banks, we want to see the 200 basis points or at least 150 basis points in that regard,’ he stated.

Nana Osei Bonsu added, “So what we need is a formula that allows the banks to calculate their base rates that allows the risk premium. So if the Bank of Ghana can use its authority to make a meaningful impact on the interest rates, it should have another formula that will allow the impact of the policy rate to be direct so that it will reflect in a reduction of interest rates.”

For 2017 alone, the Bank of Ghana reduced the policy rate by 550 basis points.

The figure dropped from 25.5% to 20%.

–

By: Pius Amihere Eduku & Anita Arthur/citibusinessnews.com/Ghana

The post Mixed reactions meet BoG’s cut in policy rate appeared first on Citi 97.3 FM - Relevant Radio. Always.

This represents a 200 basis points reduction in the policy rate which was at 20 percent.

Today’s announcement of a reduction is the first after the rate was maintained earlier in the year.

The policy rate is the rate at which the central bank lends to commercial banks for onward lending to their customers.

The Governor of the Bank of Ghana, Dr. Ernest Addison speaking at a press conference noted that the decision to reduce the rate was based on the central bank’s moves to achieve the annual inflation target.

According to him, the Monetary Policy Committee (MPC) decided to reduce the policy rate to also help ease the burden of interest payments on the budget.

“The Committee noted that the current inflation forecast provides scope for monetary policy to realign interest rates, translate the disinflation gains achieved so far to the market, and reinforce the fiscal consolidation process by easing the burden of interest payments on the budget. Under these circumstances, the Committee decided to reduce the monetary policy rate by 200 basis points to 18.0 percent”.

Dr. Addision explained that the disinflation process firmed up over the first two months of the year, with significant moderation in price pressures.

He stated that both headline and core inflation broadly trended down, alongside easing inflation expectations, an indication that the disinflation process remains well-anchored.

“Our latest forecast suggests that the medium-term inflation target of 8±2 percent is within the forecast horizon and we are on course to meeting the inflation target band,” he assured.

He made the disclosure when he addressed the media on Monday morning.

–

By: Lawrence Segbefia/citibusinessnews.com/Ghana

The post BoG reduces policy rate to 18% appeared first on Citi 97.3 FM - Relevant Radio. Always.

As a result, no one person shall assume two top positions in any regulated financial institution.

These are but a few of the strong words contained in the Bank of Ghana’s new banking business – corporate governance directive.

The document comes barely a week after the central bank announced yet another major decision involving the take over of Unibank by the Bank of Ghana, over corporate governance issues.

According to the Bank of Ghana, the directive is in fulfillment of Section 92(1) of the Banks & Specialised Deposit Taking Institutions Act , 2016 (Act 930).

Among others, the corporate governance directives seeks that the regulated financial institutions adopt sound corporate governance principles and best practices, promote and maintain public trust and confidence in regulated financial institution as well as minimize the possibility of regulated financial institution failures.

A major highlight of the corporate governance directive is the central bank’s stance on separation of powers.

Section 32 and 33 of the directives outlines the mode of selection and occupancy of the MD/CEO as well as Board Chairman as,

32. “There shall be a clear division of responsibilities at the top hierarchy of the regulated financial institution. The positions of the Board Chair and the Managing Director/Chief Executive Officer shall be separate. No one individual shall have unfettered powers of decision in any regulated financial institution and therefore no one person shall combine the two (2) top positions in any regulated financial institution at the same time. The two (2) top positions of Board Chair and Managing Director (MD)/CEO in a regulated financial institution shall not simultaneously be occupied by foreigners. One of these positions shall be occupied by a Ghanaian national.”

32. No two (2) related persons shall occupy the positions of Chair and MD/CEO or Executive Director and Chairman in a regulated financial institution.

In addition, the tenure of the Managing Director/CEO of a regulated financial institution shall be a maximum of twelve years.

This could be split into three terms not exceeding four (4) years per term.

Directors on the other hand, shall have a maximum tenure of three (3) terms of three (3) years per term.

Meanwhile, a Board of any financial institution shall have two (2) board subcommittees, namely: an Audit Committee and a Risk Committee both of which shall be chaired by independent directors.

The Audit Committee shall have oversight of the regulated financial institution‘s internal and external audit functions.

On the other hand, the risk committee shall be responsible for advising the board on the financial institution‘s overall current and future risk tolerance/appetite and strategy of the regulated financial institution for various risks including Anti money laundering or CFT risk and for overseeing senior management‘s implementation of the risk strategy.

–

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post BoG enforces separation of powers with new directive appeared first on Citi 97.3 FM - Relevant Radio. Always.

It follows what they cite as favourable conditions that warrant a further reduction in the rate at which the central bank lends to commercial banks for onward lending to customers.

The Monetary Policy Committee (MPC) of the Bank of Ghana is later today, Monday, expected to conclude its meetings with an announcement of the policy rate which is at 20 percent.

Speaking to Citi Business News ahead of the announcement, an Economist with Barclays Africa’s sub Saharan group, Ridle Markus said he is highly optimistic of a reduction.

In his view, the expected increase in oil exploration activities and the projection of a stable currency, should prompt a drop in the policy rate.

“We’re not worried about the currency; there’s a potential for 2.5 billion dollar Eurobond inflows coming through in the next couple of months. Also, the additional oil inflows will be supportive of the currency. There’s a strong case to be made that the currency could actually continue to remain around current levels even drifting slightly stronger, which then becomes very favorable to inflation. So those are a couple of reasons why I think they should be less precautionary a little bit and for cutting the policy rate.”

The Bank of Ghana has reduced the policy rate by 550 basis points over the last one year.

The figure has dropped from 25.5% to 20 percent currently.

The Managing Director of Zenith Bank, Henry Oroh also tells Citi Business News he is hopeful the MPC will reduce the policy rate to sustain the impact on private sector growth.

“Interest rates have also moved down, because the government wants to support the real sector. If interest rates go up, the cost of business also goes up but the government wants to create an environment with cheap cost of business. And I think they’ve done so well with their previous Monetary Policy Committee decisions they’ve taken.”

He added, “So I believe whatever decision they take this time around will be complementary to the previous decisions, and it will all be driven to creating macro-economic stability in the area of interest rate, inflation and exchange rate.”

–

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post Bankers, businesses urge BoG to reduce policy rate appeared first on Citi 97.3 FM - Relevant Radio. Always.

This is a significant improvement over the previous year’s figure of 7.2 million cedis.

Despite this, the bank still acknowledges the impact of the legacy debts in the energy sector on its loan books.

In the first of Citi Business News’ series of report on the performances of the listed banks, we throw the spotlight on CAL bank and reasons accounting for its performance.

In 2017, CAL bank’s income comprising revenue from loans disbursed, charges and commissions on ATM cards as well as cheques and other services, amounted to 446.3 million cedis, up from the 357 million cedis recorded in 2016.

The bank’s allocation to items such as personnel expenses, depreciation as well as loan recovery costs, went down within the one year period.

The figure declined by about 137 million cedis; from 345 to 238 million cedis.

Similarly, CAL bank’s assets comprising investments, cash as well as property, plants and equipment, reached 4.21 billion cedis in 2017 from 3.6 billion cedis the previous year.

This, the bank attributed largely to the rise in borrowing by customers.

Meanwhile between 2016 and 2017, CAL bank’s Non Performing Loans (NPLs) went up from 8 to 10.9 percent.

The Board however did not approve for the payment of dividends to shareholders of the bank.

–

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post CAL Bank records GH¢145m profit in 2017 appeared first on Citi 97.3 FM - Relevant Radio. Always.

This has contributed to the GHȼ740.5 million which is owed to an estimated 705,396 depositors in distressed or folded up Micro Finance Institutions (MFIs)  and Rural and Community Banks (RCBs).

[contextly_sidebar id=”S5usHpl5MeheE3veAs77hQVbcgLEWILL”]The BoG governor in a statement warned that the problems in the financial sector are not restricted to just banking, following the insolvency of uniBank and the 2017 collapse of UT Bank and Capital Bank.

According to the BoG, the distress in this sub-sector has been characterized by “severely impaired capital; inability to meet regulatory capital adequacy requirement; generally low asset quality; and liquidity crises.”

“These have culminated in threats to depositors’ funds thus eroding public confidence and undermining efforts to promote financial inclusion,” the statement added.

Using figures to highlight the precarious situation in the financial sector, the BoG said of the total number of 566 licensed Micro Finance Institutions in 2018, 211 are active but distressed or have folded up.

Also, out of the total number of 141 rural and community banks, 37 are active but distressed or folded up.

“In total, it is estimated that 272 out of the 707 institutions in the sub-sector, representing 38.5% are at risk.This indicates that approximately GHȼ740.5 million is owed to an estimated 705,396 depositors of the distressed or folded up MFIs and RCBs. In terms of significance, the deposits under distress form 8.81% and 52.49% of industry total deposits of RCBs and MFIs respectively.”

Sanitising Microfinance sub-sector 

Earlier in March, the BoG said it was to outline new reforms to sanitize Ghana’s microfinance industry.

The reforms are expected to among other things provide a comprehensive plan by the central bank to improve activities in the microfinance industry.

It also comes on the back of reports of customers losing their investments to some microfinance institutions when their operations have been suspended over inefficiencies.

In a publication, the BoG said there were 319 microfinance institutions.

A further breakdown showed that there were 40 money lending institutions, six  Financial NGOs as well as two hundred and seventy-three (273) microfinance institutions.

The central bank has said it will not issue any license this year for microfinance institutions.

–

By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Ailing Microfinance firms owe 700,000 depositors GHȼ740m – BoG appeared first on Citi 97.3 FM - Relevant Radio. Always.

According to her, once the takeover of the two banks was confirmed, the BoG immediately began working towards ensuring that the assets of the banks were secure.

“In the case of UT Bank and Capital Bank we were winding up those banks and the first order of business was to immediately lay hands on assets to be able to recover value and take them back,” she said.

She noted that the management of BoG has proceeded to investigate the top management of the banks and would finalize the reports in due time.

“The management of the Bank of Ghana stands by its word to complete the investigation. We will definitely get all other institutions involved in following up the result of the investigation and there is no doubt about our commitment to that,” she said.

In August 2017, the Bank of Ghana (BoG)  said it would investigate and sanction officials whose activities led to the collapse of the two banks

“The last phase of the BoG’s action would involve a thorough investigation of operations of UT Bank and Capital Bank and appropriate action will be taken against shareholders, Directors, and key a Management personnel who are found to be culpable,” the BoG Governor, Dr. Ernest Addison revealed during a press conference.

“We have not sent any auditor there what we have said is that we are in the process of sending a team which includes chartered accountants, lawyers, and bankers. The Governor said there will be an investigation, we have to get approval from public procurement before we can start because this is a very sensitive issue, not something that you go through public tender.”

The two banks declared insolvency following their inability to turn around their negative capital adequacy positions.

This necessitated a Purchase and Assumption agreement allowing GCB Bank to take over all deposit liabilities and selected assets of both UT Bank and Capital Bank, per section 123 of the Banks and Specialised Deposit-Taking Institutions (SDIs) Act, 2016 (Act 930).

The governor of the Central Bank noted that “UT Bank and Capital Bank were heavily deficient in capital and liquidity and their continuous operation could have jeopardized not only their depositors’ funds, but also posed a threat to the stability of the financial system.”

“It, therefore, became necessary for the Bank of Ghana to revoke their licenses and approve a Purchase and Assumption (P&A) transaction to allow GCB Bank, a large bank with the right balance sheet, to take over all deposits and selected assets of UT Bank and Capital Bank.”

–

By: Farida Yusif/citifmonline.com/Ghana

The post Probe into UT, Capital Banks’ collapse not yet complete – Elsie Awadzie appeared first on Citi 97.3 FM - Relevant Radio. Always.

The suggestions follow the Bank of Ghana’s decision to allow KPMG takeover the management of uniBank over their low capital levels.

It is unclear what sanctions the central bank could apply of uniBank fails to restore its operations to meet regulatory standards after the six months’ period.

Meanwhile, the industry regulator has assured customers that their deposits would be protected throughout the exercise.

Click to listen to the full audio report.

–

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post uniBank takeover: Analyst urges audit of banks’ risks to loan default   appeared first on Citi 97.3 FM - Relevant Radio. Always.

“The Bank of Ghana takes this opportunity to reassure customers of UniBank that all deposits they have with UniBank are, and will remain safe, and that they can continue to do business at any of its branches,” BoG said in a statement.

[contextly_sidebar id=”nWrXjiMsS09IBrYP2ihuewosYXx5pYRP”]The Central Bank at a press conference held earlier today [Tuesday], announced that it had appointed KPMG as administrator of uniBank since it had become insolvent.

The Governor of the Bank of Ghana, Dr. Ernest Addison, explained that the decision was to save the bank from collapse.

The BoG in a statement said KPMG as Official Administrator will play the key role of assuming control of the bank and all its branches and “carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank.”

It stated that during the period of official administration of UniBank, “the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.”

Unibank’s purported takeover

This takeover comes on the back of a purported control of the Agricultural Development Bank (adb) by Unibank weeks ago.

There were reports that uniBank had taken over adb after four shareholders of the development bank; comprising Belstar Capital, Starmount Development company, EDC and SIC Financial Services Limited, pledged their shares, proceeds, entitlements and voting rights to uniBank.

The Chief Executive Officer of uniBank, Dr. Kwabena Duffour Jr. later told Citi News that uniBank had control over adb and that the move was in the best interest of the banking industry.

This was however followed by a u-turn from uniBank, after adb was suspended by the Ghana Stock Exchange and the Bank of Ghana announced that it had not approved a purported takeover.

adb also came out to deny media reports that uniBank had taken over its operations.

UT , Capital Bank takeover

In 2017, the BoG similarly granted GCB Bank permission to take over UT Bank and Capital Bank after they were unable to increase their cash requirement need for their banking operations.

Below is the Bank’s statement on the uniBank takeover 

In exercise of its powers under Sections 107 and 108 of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) the Bank of Ghana has, effective today 20th March 2018, appointed KPMG as Official Administrator for uniBank Ghana Limited (uniBank).

Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50% of the required minimum of 10% (i.e. below 5%).

Under section 108 of Act 930, the Official Administrator is authorized to exercise a variety of powers to rehabilitate and return the bank to regulatory compliance within a period of six months, at the end of which the bank will be returned to private ownership and management.

The appointment by the Bank of Ghana of the official administrator is aimed at saving UniBank from imminent collapse. It will prevent potential losses to depositors and other creditors, and ensure that the financial condition of the bank does not create further risks for the entire financial system.

KPMG as Official Administrator will assume control of the bank and all its branches and carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank with effect from today. In line with its powers under Act 930, KPMG will ascertain the state of the bank’s assets and liabilities, and exercise a variety of powers under Act 930 to rehabilitate and return the bank to regulatory compliance and viability within a period of six months, at the end of which the bank will be returned to private ownership and management.

During the period of official administration of UniBank, the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.

UniBank’s problems are part of the legacy issues in the financial sector attributed to weak economic growth and poor corporate governance and risk management practices.

It will be recalled that UniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalized with a CAR of 4.75%.

As part of efforts to recapitalize the bank, it submitted capital restoration plans to the Bank of Ghana which it implemented to build up its capital to 7.7% in August 2017. Subsequent reviews of UniBank’s books by Bank of Ghana’s supervision teams showed that the bank had not reported the state of its loan book accurately.

Consequently, by October 2017, its CAR was estimated at negative 12.5 %, making it technically insolvent. By December 2017, its CAR had dropped further to negative 24%.

The bank has failed to submit its monthly returns to the Bank of Ghana for January and February 2018, and as a result Bank of Ghana has no evidence to suggest that its CAR has been restored to the regulatory minimum of 10%.

Efforts made by Bank of Ghana’s supervisory teams who have visited the bank’s head office several times this month to obtain current information on the bank’s financial health, proved futile as the bank’s management failed to cooperate with the Bank of Ghana staff on site.

The appointment of the Official Administrator has therefore become necessary due to the fact that uniBank has, among other things:

1. a) Persistently maintained a capital adequacy ratio (CAR) below zero (currently negative 24%), making it technically insolvent. This contravenes section 29 of Act 930 which requires a minimum CAR of 10% to be maintained at all times.
2. b) Persistently suffered liquidity shortfalls and consistently breached its cash reserve requirement. As a result, UniBank has relied extensively on liquidity support (over GHS 2.2 billion) from the Bank of Ghana over the past two years to meet its recurring liabilities. Among other things, a key shareholder of the bank managed to obtain liquidity support from the Bank of Ghana using third party banks as its agents. The Bank of Ghana’s exposure to the bank was therefore underestimated by nearly GHS 400 million, as this amount was not reflected in its books.
3. c) Conducted its credit administration in a manner that has jeopardized the interests of depositors and the financial sector as a whole.
4. d) Failed to comply with a directive of the Bank of Ghana dated 26th October, 2017 under section 105 of Act 930, prohibiting the bank from granting new loans and incurring new capital expenditures.
5. e) Failed to comply with several other regulatory requirements, including:

• Lending to a number of borrowers in excess of its regulatory lending limit (single obligor limit) under section 62 of the Banks and SDIs Act, 2016 (Act 930);
• Borrowing from the inter-bank market without the written approval of the Bank of Ghana when its CAR was less than the prescribed ten percent (10%), in breach of section 66(1) of Act 930.
• Outsourcing a number of services such as those of tellers, receptionists, and security, to affiliate companies without the prior approval by the Bank of Ghana, contrary to section 60 (12) of Act 930.
• Refusing to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities, including deliberately concealing some liabilities from its balance sheet, and failing to submit documents and records for supervisory inspection.
• Poor corporate governance and risk management practices which rendered the bank vulnerable to macroeconomic shocks.
• Generally conducting its affairs in a manner detrimental to the interests of depositors and the financial system as a whole.

In spite of the Ministry of Finance recently agreeing to absorb a significant amount of the debts of Government contractors owed to the bank to the tune of ¢428,817,961 (backed by Interim Payment Certificates issued to contractors), the bank has not been able to address its capital deficiency, which has continued to deteriorate.

Also, the bank engaged in significant transactions with its parent company and affiliate companies including connected lending and other related party transactions without sufficient controls as required by law.

Allowing the continuation of UniBank’s activities in their current form would be detrimental to the interests of depositors and the banking system as a whole.

Several attempts by the Bank of Ghana to work together with management and shareholders of the bank to address the capital deficiency and liquidity challenges have failed to achieve the desired outcome, making the continuous reliance on Bank of Ghana for liquidity support unsustainable.

More recently, the bank’s announcement of a purported pledge of ADB Bank shares in its favour by its shareholders to secure commitments for recapitalization, were deemed by the Bank of Ghana to be null and void as no prior approval had been obtained from the Bank of Ghana as required by Act 930 for acquiring significant shares in a bank or exercising other forms of control by virtue of any transaction.

In any event, a request by the Bank of Ghana to the bank to submit copies of the Deed of Pledge and underlying transactional documents were not heeded by uniBank, its shareholders, directors, or management.

Furthermore, there are additional regulatory hurdles outside the control of the Bank of Ghana required to be cleared by UniBank before potentially realizing any value, if at all, from the said transaction, making it incapable of addressing the immediate capital and liquidity needs of the bank.

The Bank of Ghana takes this opportunity to reassure customers of UniBank that all deposits they have with UniBank are, and will remain, safe and that they can continue to do business at any of its branches.

NO DEPOSITOR OF THE BANK WILL LOSE ANY MONEY.

Bank of Ghana remains committed to supporting the orderly development of Ghana’s banking sector including indigenous Ghanaian banks, while promoting a strong and resilient sector to drive Ghana’s economic growth.

Kindly direct any questions to Bank of Ghana. You may call telephone number 0302665034 or send email to [email protected].

–

By: Marian Ansah/citifmonline.com/Ghana

The post uniBank takeover: Deposits are safe – BoG appeared first on Citi 97.3 FM - Relevant Radio. Always.